How To Start An Amazon FBA Retail Arbitrage Business

For most people, shopping means spending money they never get back.

But, what if you could turn shopping into a new income stream?

With retail arbitrage, it’s actually possible to buy and sell everyday products you find at stores like Walmart for a handsome profit.

If you want to learn how to start a retail arbitrage business and scale your online business, our Amazon retail arbitrage guide has everything you need to know.

How To Start An Amazon FBA Retail Arbitrage Business

What Is Retail Arbitrage?

amazon-fba-retail-arbitrage

The term “arbitrage” refers to leveraging price discrepancies between markets to buy and sell something at a profit.

In other words, arbitrage is “buying low and selling high” to make money.

Retail arbitrage means buying ordinary retail products and then flipping them for a profit.

Typically, retail arbitrage businesses buy inventory from cheaper clearance stores and then sell online to access a large market.

For example, you might see an item marked down in the clearance aisle of Target selling for $0.99.

Your friend who lives in another part of the country might walk into Target and see that same item selling for the regular price of $8.99.

Retail arbitrage is taking advantage of this and selling the clearance items to your friend for a a higher price.

In this case, you could buy the item for $0.99 and sell to your friend for $3.99.

You made money and she saved money.

Now multiple this idea on a larger scale with an Amazon FBA business and you are making a lot of extra money.

How Retail Arbitrage Works

If you want to make money with retail arbitrage, this side hustle is fairly simple on paper.

However, there are several best practices retail arbitrage sellers use to have the best chance of selling for a profit.

For starters, sellers often buy inventory from popular retail arbitrage stores.

Here are the best stores to consider:

  • Best Buy
  • Big Lots
  • CVS
  • Home Depot
  • Kmart
  • Kohl’s
  • Old Navy
  • Rite Aid
  • Target
  • T.J. Maxx
  • Walgreens
  • Walmart
  • Thrift Stores

You want to shop at stores that have low everyday pricing and also run frequent clearance sales.

This helps widen the potential pricing discrepancy between your purchase price and resale price, resulting in more profit.

In terms of what to buy, some of the best retail arbitrage products include:

  • Books
  • Baby supplies
  • Clothing
  • Electronics
  • Home goods
  • Makeup and personal care products
  • Shoes
  • Sports equipment
  • Toys

Ultimately, successful retail arbitrage requires finding in-demand products that are cheaper to buy in-store than online.

This might sound simple, but retail arbitrage margins are tight, so product selection is critical for success.

Thankfully, you don’t have to do all of the heavy lifting if you do retail arbitrage with Amazon, the world’s leading ecommerce platform.

Retail Arbitrage Amazon: Why People Use Amazon FBA

Amazon already dominates U.S. e-commerce, so it’s a massive marketplace of buyers that retail arbitrage sellers can take advantage of.

But why is online arbitrage with Amazon popular?

The answer is Fulfillment by Amazon, or the Amazon FBA program.

Amazon-FBA

As an Amazon FBA seller, you ship inventory to Amazon warehouses for a fee.

When you make a sale, Amazon handles shipping and logistics.

This lets you focus on sourcing inventory to sell and saves time since you don’t have to worry about packaging, shipping, and dealing with potential customer complaints.

The bottom line is that if you want to leverage Amazon’s massive customer base and simplify your retail arbitrage business, Amazon FBA is the best solution.

How To Start Amazon FBA Retail Arbitrage

Amazon seller arbitrage is easy to start since Amazon streamlines the process of signing up and using FBA.

#1. Create An Amazon Seller Account

The first step to begin Amazon retail arbitrage is to create an Amazon FBA account.

You use an existing Amazon account or create a new one to sign up for Amazon FBA.

Additionally, there are two seller plans:

  • Individual Seller: Pay $0.99 per item you sell
  • Professional Account: Pay $39.99 per month regardless of sales volume

As a new Amazon retail arbitrage seller, stick with the individual plan since it takes time to grow your inventory and learn what sells well.

#2. Source Retail Arbitrage Products

Once you create an Amazon FBA account, you’re ready to source inventory.

For your first batch, anticipate spending at least $50 to $200 so you can buy several products to learn how Amazon retail arbitrage works.

As mentioned, you should focus on sourcing products that are on clearance from stores like Kohl’s, Target, and Walmart.

When you get to a store, look for popular clearance products you think sell well on Amazon.

When you find a product, use the Amazon Seller App for Android or iOS to check the item’s price on Amazon so you know what your potential margin is.

Amazon-seller-app

The app also has stats like average star rating and sales volume. Plus, the app spits out a profit estimate for products.

Find products that sell for at least a few dollars in profit.

After all, if you buy fidget spinners for $1.25 and resell them for $2, you’d need hundreds of sales to make meaningful revenue.

Because of this, many retail arbitrage sellers stick with selling products in the $20 to $50 range.

Visit a few stores in your area, find popular products like toys, books, and apparel, and use Amazon’s Seller app to guide your purchases.

#3. Create Amazon FBA Listings

Once you purchase your starting inventory, the next step is to create your Amazon listings so your products are available for sale.

Amazon has a guide for how to list products for sale.

But, here’s a strong chance a listing already exists for the products you’re selling.

It’s only novel products that you create listings from scratch for.

To match a product to an existing listing, you must include:

  • Condition
  • Price you’re selling it for
  • Quantity
  • Shipping options

You can search for existing listings by using product identifiers like UPC codes or an ISBN.

Amazon states you shouldn’t “include merchandising information in the item name. Use the product description and the bulleted list for adding merchandising details.”

But, you can still edit your product’s description and bullet list to add details about the products to encourage customers to buy from you.

#4. Pack & Prep Your Products

After you create your Amazon FBA listings, it’s time to ship your inventory to Amazon warehouses.

This is the most difficult aspect of Amazon retail arbitrage.

Amazon has unique packing and shipping requirements for different product categories and product sizes.

So, the packing requirements for t-shirts are different from the requirements for hand cream.

For starters, consult Amazon FBA’s packaging and prep requirements guide.

This guide outlines requirements for various product categories and has videos for how to pack certain types of products. Amazon also has guides for unique categories like liquids, fragile products, batteries, and sharp objects.

If this is overwhelming, you can use Amazon FBA’s prep service.

With this service, Amazon packages and preps your products for fulfillment, so you just ship them to Amazon warehouses and then your job is done.

Prep service fees vary depending on product category and size.

For example, standard-size fragile products cost $1.10 per unit for prep and labeling, while baby products cost $0.50 to $0.80 for the service.

You should use Amazon’s prep service while you’re learning the ropes so you can get your retail arbitrage business running.

However, factor this cost into your profit margin so you don’t have any nast surprises.

#5. Ship Products To Amazon Warehouses

When you send or replenish your inventory, you create a shipping plan through your Amazon FBA account.

Like other steps, Amazon has a guide for how to add products to your shipping plan.

Note that you still have to pack products properly so they arrive in-tact at fulfillment centers if you use Amazon’s prep service.

This is especially important for fragile products, so stock up on supplies like boxes and bubble wrap.

Amazon can even require overboxing for certain products, which involves packing a box inside of a larger box for additional protection.

Amazon outlines shipping requirements for different product categories you can follow if you don’t use the prep service.

You also label your packages unless you use Amazon’s prep service.

Next, ship your products to Amazon fulfillment centers.

Chances are, you fall under “small parcel delivery” if you’re sending fewer than 200 products and your products aren’t oversized or weigh more than 50lbs.

In this case, you usually use DHL, UPS, FedEx, or a similar service to ship to Amazon.

#6. Make Sales & Optimize Listings

Once your packages arrive at an Amazon fulfillment center, the fun begins!

Your listings now have inventory, and if you generate sales, Amazon handles fulfillment on your behalf.

It generally takes time to get your first sales on Amazon, especially if you’re competing with multiple sellers for popular products.

But, even if it takes several weeks before you get a sale, it’s important to give your listings the best chance to succeed.

This means focusing on Amazon listing optimization, which includes:

  • Using relevant keywords in the product description
  • Using bullet points in the product description
  • Adding as much product detail as possible to help customers who use specific search filters when shopping
  • Using a proper title and not stuffing it with too many keywords

You can also try other tricks.

For example, after you make a sale, Amazon lets you message the customer to ask for a review.

Reviews help you rank higher on Amazon, so get into this habit.

If customers ask questions on your listing, answer them in a timely manner as well.

#7. Replenish Your Inventory

As you make sales, it’s tempting to bank your extra cash or to invest the money.

While you should enjoy some of your profits, it’s also important to reinvest into more inventory.

Successful Amazon retail arbitrage businesses gradually scale inventory to sell more of winning products and to continue experimenting with new ones.

When you find a product that sells consistently, make an effort to buy more of it in-store.

Additionally, use the Amazon Seller app and your intuition to test other popular products that have a wide enough margin for you to make a profit.

Advantages And Drawbacks

Before giving Amazon retail arbitrage a try, consider the following pros and cons of this side hustle idea.

Advantages

  • A low-cost business idea to try
  • Take advantage of Amazon’s existing marketplace and logistics
  • Amazon FBA products are automatically Prime-eligible
  • Amazon sells internationally
  • Services like Amazon Prep help simplify your operations
  • Highly scalable if you find winning products

Drawbacks

  • Selling on Amazon is competitive, especially for popular listings with many sellers
  • Tight margins
  • No guarantee of earnings unlike other online side hustles
  • Weekly retail arbitrage takes time

If you’re looking for a passive income source or online job that guarantees a paycheck, Amazon retail arbitrage isn’t for you.

But if you want to start an online business with a small amount of money and gradually scale your operation through hard work and patience, this side hustle is worth trying.

How Much Can You Make With Retail Arbitrage?

Amazon retail arbitrage has an incredibly high earning potential.

For example, there are success stories, like this Amazon retail arbitrage seller who makes millions reselling goods from Walmart and Target on Amazon.

However, like any resale business, retail arbitrage takes time and practice to scale.

Additionally, the more inventory you carry, the greater your financial risk.

If Amazon suddenly decides you can’t sell a certain product but you have dozens of SKUs in a warehouse, you’re on the hook.

Depending on how many items you are selling, you could make as little as $100 a month or more than $1,000 a month.

When I was doing this on the side, I was making around $500 a month without much work.

Ultimately, Amazon retail arbitrage is a side business for most.

It’s possible to scale to full-time income, but don’t expect results overnight.

The Easiest Way To Get Started

If you are interested in reselling on Amazon, your next question is probably what is the best way to get started.

For me, I just jumped in head first and figured things out as I went.

I earned a couple dollars at the start and lost money on some things too.

But as I learned, my income increased.

Eventually I was making $500 a month.

But it was a lot of trial and error and a lot of time.

Luckily you don’t have to go through the same issues I experienced.

Here is a free guide to help you easily find the items that will turn a profit reselling on Amazon.

All that is left for you to do is start making money!

Amazon FBA

Frequently Asked Questions

Frequently Asked Questions

Here are the common questions I get asked about retail arbitrage and Amazon FBA.

Is retail arbitrage legal on Amazon?

Yes, Amazon allows retail arbitrage.

Just remember to use the Amazon Seller app to scan products since it flags products that aren’t eligible for resale on Amazon.

What are the fees for selling on Amazon?

There are 2 fee tiers for sellers and you pick the one you want based on how many items you plan to sell.

Amazon-FBA-seller-fees

If you plan on selling a few items a month, meaning less than 40, then getting charged the $0.99 per item with the Individual plan is cheaper.

If you plan on selling a high volume of items, then opt for the Professional plan.

Does retail arbitrage still work?

According to Statista, third-party sellers account for 55% of sales on Amazon.

Additionally, according to Jungle Scout, 64% of Amazon sellers become profitable within their first year.

It’s clear that Amazon retail arbitrage still works.

But this doesn’t mean sellers aren’t testing new methods.

For example, sellers are increasingly turning to private label products instead of pure retail arbitrage.

Private labeling involves buying products directly from a manufacturer and making modifications, like adding a logo or unique packaging, to create your own products or brand.

Sellers are also experimenting with other e-commerce platforms like Shopify and Walmart’s marketplace.

The key is to avoid putting all of your eggs in one basket in case Amazon retail arbitrage becomes too competitive.

However, for now, it’s still a viable business model worth trying.

How can I make the most money on Amazon?

You want to make sure you have large profit margins for the items you are selling.

This means you need to be able to sell an item on Amazon for at least 30% more than what you bought it for.

For example, if you bought shampoo for the low price of $0.99, you need to sell it for roughly $1.35 or more.

Some very successful Amazon sellers say you should only sell items with a 50% profit margin or higher.

Wrapping Up

I hope this guide helps you understand the basics of how to do Amazon retail arbitrage.

This business model has a steep learning curve and tight margins.

But, it’s possible to grow your Amazon FBA retail arbitrage business on the side, even while holding down a full-time job.

Just remember to have patience and to reinvest your profits as you learn.

Testing new products is the key to finding your massive winners, and once you make your first few sales, you’ll be hooked on making money with Amazon seller arbitrage.

Amazon FBA

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